Financial Checklist For Canadians in 2019

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The first month of the year is a good time to start planning your finances and taking charge of your money. Waiting till the end of the year before implementing your savings and investing plans means that you have allowed 12 months to go by without utilizing compound interest to your advantage.

Financial Steps To Take in 2019

As you move to implement your New Year’s resolutions, this financial checklist will help you focus on some of the key financial steps you need to take.

1. Contribute to your TFSA

The Tax-Free Savings Account (TFSA) is one of the best vehicles we have in Canada for saving money.

For 2019, the TFSA contribution room is $6,000, an increase of $500 from last year. If you have been eligible to contribute to a TFSA since it was introduced in 2009, your total contribution room is now $63,500.

A TFSA account is very flexible and can hold a variety of investments. You can use it to save for anything – wedding, home down payment, vacation, emergency fund, etc. You can withdraw your funds whenever you want and re-contribute the amount you withdrew in a future year.

No taxes are due on earnings generated by your account unless you run afoul of the rules put in place by the government.

The sooner you start contributing to your TFSA, the faster it will grow.

2. Contribute To Your RRSP

RRSP contributions are tax-deductible and will save you on taxes today while allowing you to grow your retirement pot.

For 2019, your RRSP contribution limit is 18% of your earned income, up to a maximum amount of $26,500. If you have not yet maxed out your contributions for the 2018 tax year, you can still do so up until the end of the RRSP season, which is March 1, 2019.

If you are turning 71 in 2019, you can make your last RRSP contribution before December 31, 2019. By next year, you will be required to close your RRSP and do one or a combination of the following: withdraw cash, convert to an RRIF, or purchase an annuity.

3. Contribute To An RESP

College tuition keeps rising and a registered and a Registered Education Savings Plan (RESP) is one way to provide your kids with an opportunity to obtain post-secondary education without the debt.

Contributions you make to your kid’s RESP qualify for matching government grants at 20 cents for every $1 of contribution, up to $500 in grant money per year (i.e. grant on $2,500 in annual contributions).

4. Pay Off Debt

It is never too early to start thinking about paying off debt, particularly, high-interest debt like credit cards.

Create a budget that allows you to set aside specific amounts of money every month to settle your debt obligations. Consider paying off credit card debt before saving/investing in a TFSA or RRSP. This is because interest rates on credit cards can reach 20% or more, exceeding any realistic returns you can expect on your investments.

6. Audit Your Investment Portfolio

If you forgot to audit your investment portfolio at the end of last year, it’s time to get on it. Two important things to note:

Re-Balancing

If you are a DIY investor and invested in ETFs or Index Funds, you will need to re-balance your portfolio 1-2 times a year. This is to ensure that your asset holdings are still in line with your investment goals and risk tolerance.

Fees

Fees cut into your investment returns and should be minimized wherever possible. For example, if you are invested in mutual funds, you should take a look at the fees you are paying and be certain they are worth it.

Mutual funds are extremely expensive in Canada and we pay some of the highest MERs in the developed world! Check if your comparative returns are worth justifying the fees you are paying.

Even if you manage your own portfolio using online discount brokerage accounts, you should still audit how much you are paying on fees. Many investors end up buying and selling too often and rack up trading commisions that dampen their overall returns.

In addition to fees on investment fees, you should aim to pay less in bank fees in general. You can easily open a free chequing account and stop paying this monthly bank fee as well!